The Fraught Comeback of American Manufacturing

I figured it was time to weigh in on the debate over Detroit-based Shinola, a company that has gotten a lot of attention as well as some seriously critical coverage in recent months, after I read Philadelphian blogger Zoe Gould’s editorial in Belt Magazine about the topic. The resurgence of “Made in USA” following consumers’ shocking realizations that there is actually some value to “buying local” has been advanced by companies eager to market that value– sometimes in an extraordinarily problematic fashion, as in the case of distressed Rust Belt cities looking for love and capital.

Gould’s article, not the first, alleges disingenuity on the part of the brand, which prides itself on manufacturing wristwatches and exorbitant bicycles in Detroit, a city known for a manufacturing legacy as well as for its truly spectacular fall from grace. Accusing the company of “profiting off the romance of poverty,” her fitting title, Gould’s unambiguous disapproval of the company cites, among other examples, a heavy-handed marketing video which, she aptly characterizes as “a cross between a tampon commercial and a senatorial campaign. White and mixed-race millenials jaunt around Detroit on multi-thousand dollar bicycles mingling with impeccably dressed black school children and old Motown singers.” (I mean, pretty much. You can see the videos here— they clearly employ a very fancy marketing team that is not terribly sensitive to the complex cultures or politics in a city like Detroit.)

Gould also refers back to Jon Moy’s scathing, thorough, and mostly spot-on critique of “Shinola as White Knight,” which castigates the company as emblematic of the boutiquization of Detroit, where, Moy points out, the per capita income is a measly $14,000 and no one can afford a damn $550 watch. Beyond the expense issue, which, Moy says, he can get down with when all is said and done, he also criticizes what he views as an insidious and colonial form of marketing– gentrification at its worst. “Instead of starting in his parent’s garage,” Moy laments, “Shinola is a trust fund kid that decided one day he wanted to start a company and had his dad buy him all the cool stuff.” But is that the point?

A Brief History of American-Made Brands in the Era of Global Economy

Moy’s personified Shinola is none other than entrepreneur Tom Kartsotis, who at age 25 founded with his brother Fossil, three decades later a $3.25 billion enterprise that makes its money by importing mid-grade watches from Chinese factories. Fossil manufactured its own vintage-styled brand and has also picked up other brands along the way, notably Chinese-made Skagen Denmark (actually an American company that has never manufactured watches in Denmark, contrary to what many of its customers may believe) and Swiss Zodiac. The firm also started manufacturing its own higher-end Swiss watches just last year. Kartsotis, who still owns a minority share of the publicly traded company, which is, to say the least, still making some bank, went on to found Bedrock Manufacturing in 2003, a venture capital and private equity firm that would go on to eventually encompass brands like Shinola and Filson.

Since these brands don’t exist independently in some sort of economic vacuum, I was curious about the degree to which Bedrock had messed with brands like Filson, which it acquired last year as Shinola was starting up. I wanted to get some sort of inside perspective from someone in the industry and I spoke with Will Morgan from David Morgan, a semi-centenarian retailer in the Seattle area that carries a number of Northwest manufacturers but dropped Filson prior to the 2012 acquisition. Filson, a manufacturer of high-end rugged outdoor and westernwear (think a Northwestern Cabela’s but more boutiquey and less NASCAR) had been previously acquired in 2005 by private equity firm Brentwood Associates, which also in 2006 also boughtAllen Edmonds, probably the best-known American manufacturer of high-end men’s shoes. Morgan, who was familiar with Shinola, said that his company’s problem with Filson came not from the Bedrock acquisition but from the Brentwood acquisition and cited 2005-era Filson’s emphasis on what he termed a “department store model,” a “churning” of fashionable, imported, seasonally varying designs– with the accompanying emphasis on frequent and bountiful sales.

In today’s economy it is almost impossible to distinguish the purely aesthetic hipster culture of banal consumption from one that actually places substantial value on American-made production, as seen here in this image from a photo shoot on Denimfuture of Filson products.

Morgan said that Filson’s failed 2005 “Lodge” line suffered from quality problems but that its focus on moving cheaper products on a faster, seasonal turnaround basis ultimately failed to attract their stalwart base of retailers and consumers in the “hook and bullet” market (folks who shoot and catch fish– but not the same folks who upgrade their Chinese-made coat every season at Cabela’s). Similarly, Allen Edmonds in the Brentwood era began manufacturing the likes of MLB-themed boat shoes in the Dominican Republic, but still makes most of its $375 cap toes, etc. in its Port Washington factory. It is unclear why Brentwood divested of Filson, which, Morgan said, had recovered under its next CEO in 2006, Bill Kulczyki, formerly of Patagonia, other than perhaps it was time to move onto the Next Big Thing as private equity purveyors of LBO’s are wont to do, and since then Filson has been growing steadily and continues to manufacture many products domestically. You can buy Filson bags next door to Shinola’s flagship store at Willy‘s, and no, they’re not cheap, either. (Peruse them while you buy a $10 bottle of juice, because that’ll save Detroit.)

Like most consumer products, Shinolas use a combination of imported and domestic parts. Inability to manufacture at sufficient volume was cited as a reason for using Chinese-made watch cases (though I find it hard to believe that Kartsotis could build a $3 billion company but couldn’t find a manufacturer for a volume of affordable stainless steel watch cases anywhere in the Rust Belt, which still produces most of the nation’s steel), but the straps are domestic leather in an era when Chinese or Indian leather manufacturing is common, and the quartz movement is partly Swiss made and assembled in Midtown Detroit.

A snapshot of some of Shinola’s 41mm models at their flagship Midtown store, ranging from $550 to $1000.

Lest we forget that there are criteria that must be satisfied for a product to even be considered “Made in USA,” it’s significant to consider not only the value of creating employment in the skilled arts and crafts of watchmaking but also in the business model itself as far as growing that employment base. The Economist also pointed out that Swiss watches are usually sold at a ten-fold markup compared to Shinola’s four-fold markup– This means that a Shinola watch would start at about $150-250 in production costs per unit, but would sell, in Rolex terms, for $1500-2500. (Rolex, one of the most recognizable watch brands in the world, sells watches for well over that range– in simple economic terms, it seems to make sense that Shinola would want to undercut their prices, especially if they can undercut their huge markup.)

On the company’s growth, 29 positions were open as of my writing this, and those included 13 positions in Detroit, including positions for actual manufacturing. Can anyone point me to other companies that actually hire manufacturing positions in the same place they hire IT positions and business analysts? There are very few, and what’s more, those actual companies that we view as White Knights (e.g., a friend of mine once said that she’d move to Detroit if Google opened up a big office there) don’t manufacture anything in this country. Apple, the hero of young, white liberals, for example, trumped its domestic manufacturing of one boutique product that no one can afford anyone. In other words, you can’t apply to a job in an Apple factory to make iPhones.

For all its faults, Shinola has completely debased what I’ve long characterized as the idiotic myth that it’s unaffordable to manufacture products in the United States. So, yes, it’s good that things are being made and those things are creating jobs. But Shinola, too, plays directly into the culture of hipster incursion. In amortized terms over the life of an expenditure, I can afford a $700 wristwatch (say, 3 cents a day for the rest of my life) more readily than I can afford a $10 bottle of juice, or a $4 cup of Los Idolos (Sugar Cane Process) pourover coffee served to me while I shop for my $700 watch. Let’s go back to the amortized cost bit– if coffee will cost you a minimum of $1.50 per day, then you reach wristwatch break-even after buying that coffee for a year and a half, or, roughly the same in savings between a normal cup of coffee and a cup of “pourover single origin fair trade small batch hand-roasted by a white guy with a beard who has at least a bachelor’s degree from EMU-or-better.” In other words, there is short-term, disposable consumption and then there is consumption as long-term investment (sure, plus a bit of fashion). The notorious Detroit-bred White Entrepreneurial Guy meme captures the former perfectly: the hipster urban revolution’s drive to consume, consume, consume in the process of populating, repopulating, densifying the fallen city.

“Buying something made in Detroit, in this calculus, is not much different than buying a fair trade Andean sweater. You’re buying a small piece of the revival of a great American manufacturing city gone to seed. Or at least, you’re buying into the liberal idea of what supporting a distressed economy means.”

It’s true– it is a pretty happy-go-lucky-liberal idea, after all. But for all of Caramanica’s snark, never mind the fact that he himself is probably paying more rent in Brooklyn every month than the price of a Bixby bicycle, the company is a smash hit with a target of several hundred thousand watches produced per year by 2015 . If Detroit itself nets even 10% of that revenue, that’d be about a six figure sum reinvested into the city every single day. No, it’s not a home-grown enterprise, and yes, I think it is a load of crap to pay thousands of dollars for a bicycle that isn’t made out of, say, moon-fiber.

But is the idea of “Detroit as a watchmaking center” laughable because its watchmakers (plural– there is another!) came out of a private equity firm rather than having grown out of a small cottage by a bubbling brook? What about a company that makes some of its watches in Pittsburgh as well as a $2,450 model made in Nepal, whose advertisement claims that it’s appropriate for them to making watches in the Himalayas, since, after all, time is sort of standing still there (I didn’t make that last bit up). Or, what about a company that does no advertising whatsoever but sells volume foreign-made-domestically-assembled-by-union-labor watches? The reality is that only one of these companies has a strong marketing presence, and it is the one that is taking the market by storm. [Neither Hampden nor Detroit Watch Company responded to requests for comment.]

The Elusive Balance Between Cultural Piracy and Economic Growth

Critics make some good points. Caramanica’s snide dismissal of Shinola seems to come more from New York’s coastal chauvinism and denigration of all things not-New-York than it does from a real critique of the product itself; Gould, meanwhile, concludes by saying that “[t]here is no debating that in the Shinola fairytale, they are the heroes. And Detroit does not want to be saved.” It doesn’t?

If “saved” means “brought a bit farther from its current state of economic and municipal catastrophe,” then I think that Detroit wants to be saved. But it doesn’t want to be patronized. There’s a big difference– the former involves a bailout by means of a creative and diverse base of investments, experiments, influx of new residents, and renovation of infrastructure and architecture. The latter involves cultural piracy. Detroit is in many ways the ultimate experiment. How do we solve the issue of such a large municipal bankruptcy? Such a gross scale of disinvestment and unemployment and poverty? How can we discuss gentrification as expropriation in a city where most of the housing stock remains quite affordable even after new development or investment occurs? Nancy Derringer’s article points out the problematic nature of the “7.2” issue– TLDR: “We can exist inside this 7.2 square mile safe haven of consumption and new investment, but forget the rest of y’all, maybe.” Indeed, many projects go beyond marketing experiments and Shinola pales in comparison to some of them.

Native Detroiter or not, I’m ticked off by that. I was dismayed when I visited Detroit and found that the craft cocktail bars are just as exorbitant as they are in Chicago, indicating that yes, this is a destination for the handful of y’all with hefty salaries. My thought process went from, “Well, maybe they’re just Brooklynites selling to other major-metropolitan-transplants,” to “Well, if this starts a conversation about better, cheaper establishments, I’m all for this rather than the space being abandoned instead.” Cautious optimism, but that won’t stop me from snarky commentary questioning the real necessity of a $12 cocktail. David Wondrich offers an interesting take on gentrification of a city through its drinking culture.

When I mentioned the idea of marketing, Will Morgan saw it as disingenuous to try and ride the coattails of a well-established brand, for example the rugged likes of Filson or Eddie Bauer, to establish a diversified, mass consumer product with a big market share. He told me a story about buying a pair of thermal wool long underwear from REI that, he said, were liberally branded with information and flags about their Scandinavian manufacturer, only to find later that the darn things were made in China. Does this not seem a far worse sin than any committed by Kartsotis’ Detroit experiment?

At the risk of sounding like I’m reducing this argument to “any new investment is good investment,” I think that it’s important to understand any company as one of so many cogs in the giant wristwatch of metropolitan economy rather than as emblematic of the coming tsunami of cultural problems and expropriation. Detroit will never be Brooklyn (thank God), and I can only hope that its path toward economic stability can learn from Brooklyn’s disasters. Ryan Harte concludes his article on the Brooklynization of Detroit (Brooklyn, an apt metonym for the Great Force of Gentrification) by saying that indeed, no one costly, panacean project or policy will “save” the city, but rather, that support is needed for many varieties of experiments whose successes can be underwritten and repeated, namely through a democratic process.

There was no democratic community process governing Shinola’s over-the-top marketing campaign that advertised that you, too, can be young, white, and conspicuously consume in the Motor City. But Hart might agree with Shinola’s characterization of Detroit as a nice city of nice people, with the added commentary (emphasis added): “Detroit does not need to be business friendly, manufacturing friendly, or convention event friendly. Detroit needs to be people friendly. And we are. Meet us and you will see the people here are full of pride and loyalty to their communities…” That is something I can get down with.

About Nat Zorach

Nat Zorach is an urban development and energy professional working in Detroit and Chicago.